In Tacoma on Wednesday, US District Judge Benjamin Settle sentenced Edna Fiedler of Olympia, Washington to two years in prison for her role as an accomplice in a Nigerian check scam. This is the all-too-familiar scheme in which a mark who has goods for sale is paid with a phony check for more than the amount and asked to return some of the proceeds, eventually winding up on the hook for the whole amount. Fiedler had pleaded guilty in March to conspiracy to commit bank, wire and mail fraud. She worked in connection with a man from Lagos, Nigeria who shipped counterfeit checks and money orders to her with instructions on how to fill them out and where to ship them. When she was arrested in December she had already shipped out over $600,000 in phony checks and money orders and had $1.1 million more ready to ship. No word on whether the people who fell for the scam will be investigated for terminal idiocy (Seattle Times).
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Attorneys for actor Wesley Snipes on Wednesday filed a motion in US District Court in Ocala, Florida requesting that US District Judge William Terrell Hodges grant permission for Snipes to go to London to do post-production work on one movie and then to Bangkok to start work on another. Snipes was convicted in February on three failure to file misdemeanor tax counts and sentenced in April to three years in prison. He is free on bond pending appeal but the USAO is challenging that ruling, so expect them to fight this tooth and nail (Ocala Star-Banner).
The Sun Herald has the Dickie Scruggs sentencing transcript in plain text, Folo has a partial transcript from the Backstrom sentencing. The Clarion-Ledger has reactions from various parties, including Judge Henry Lackey. Alan Lange at Y’all Politics criticizes the questionable post-sentencing comments of AG Jim Hood and former AG Mike Moore. The Sun Herald points out that the minimum security Pensacola prison Scruggs has requested is the same one that houses Paul Minor whom Scruggs testified against; the Bureau of Prisons is unlikely to allow both men in the same facility. Alan Lange’s editorial is outstanding, and the Sun Herald’s editorial is also worthwhile. UPDATE: here’s the official transcript of Dickie Scruggs’ sentencing hearing; the Backstrom transcript is here. (h/t folo).
There has been some confusion in the reporting of the length of the sentence, but both the Daily Journal and folo are reporting that Sid Backstrom was sentenced to 28 months in prison this afternoon by US District Judge Neal Biggers in Oxford. That’s two months less than the maximum under his plea agreement, which capped his sentence at no more than half of whatever sentence Dickie Scruggs received. As with Scruggs, Backstrom was fined $250,000 and ordered to pay for the cost of his incarceration. He was ordered to report to prison on August 4. The court accepted a defense request to ask for imprisonment at Forrest City, Arkansas. UPDATE: here’s the transcript (h/t folo).
The Sun Herald reports that US District Judge Neal Biggers has sentenced Dickie Scruggs to five years in prison, the maximum under the plea agreement, plus a $250,000 fine. He was ordered to report to prison on August 4 “in a facility that offers mental health and drug treatment.” Tom (NMC) Freeland at folo reports that in response to Ole Miss Chancellor Robert Khayyat’s letter (earlier), which among other things called imprisoning Scruggs “a waste of taxpayers’ money”, Judge Biggers increased the fine to account from the cost of incarceration.
US District Judge Paul Huck in Miami on Wednesday reduced the sentence of former Jack Abramoff associate Adam Kidan from 70 months to 35 months in prison because of his extensive cooperation in the SunCruz Casinos case which resulted in his and Abramoff’s convictions. Kidan pleaded guilty in December 2005 (followed by Abramoff’s plea in early 2006) to conspiracy and wire fraud in the case, admitting that he and Abramoff counterfeited a $23 million wire transfer which induced lenders to fund loans toward their purchase of the gambling ships from Gus Boulis. They were sentenced in March 2006; Kidan has already served 20 months in prison (Miami Herald).
Boulis was murdered in an apparent mob hit in 2001; the Herald story says that Kidan was attacked in prison in New Jersey after he was deposed by lawyers in the pending trial of three men accused in Boulis’ murder. Here’s the Washington Post’s extensive background article from 2005, including congressional connections.
In a decision filed on Tuesday and released on Wednesday, the US Court of Appeals for the Eleventh Circuit for the third time denied former HealthSouth CEO Richard Scrushy’s motion for bail pending appeal. Scrushy had asked for reconsideration because the court in March granted his co-defendant, former Alabama Governor Don Siegelman, release on bond pending appeal (earlier). However, the court ruled that Scrushy still “had not met his initial burden…of demonstrating by clear and convincing evidence that he is unlikely to flee if he is released pending resolution of this appeal.” The court made it clear that this is a separate issue from whether his appeal has a substantial chance of success (AP).
Representatives from the Sun-Herald (here and here), folo, the Daily Journal, and others were allowed to examine the sentencing recommendation letters from the public on behalf of Dickie and Zach Scruggs and Sid Backstrom. Tom (NMC) Freeland at folo called the positive letters “pretty standard: most accept the gravity of the offense and guilt, but try to explain positive things they have seen about the various defendants over the years.” That’s to be expected from family, friends and associates.
The lowlight: a letter from Ole Miss Chancellor Robert Khayyat on University stationery enthusiastically fawning over Dickie Scruggs, calling him a “model citizen” and calling any incarceration “an absolute waste of a great deal of talent and ability.” We’re talking about an admitted judge briber here, someone who attempted to corrupt justice, and the university’s chancellor thinks that’s excusable in a major financial contributor.
The missing: nothing from Jim Hood, Trent Lott, Mike Moore or P.L. Blake.
The opposition: criticism from Mississippi Bar president Robert Bailess and an unnamed retired Oxford police officer.
Those who examined the letters were not allowed to copy them, which prompted this outstanding response from commenter Fyodor1 at Y’all Politics: “Can we just send in Sandy Berger to help get copies of all the letters? He has a good track record at getting documents.”
UPDATE: Anita Lee at the Sun Herald has more excerpts from the letters.
In a sentencing memorandum filed on Wednesday, attorneys for Dickie Scruggs asked the court to impose a 30 month sentence instead of the maximum 60 months allowed under his plea agreement. His primary argument is that the potential benefit from the bribe has been grossly mischaracterized by the US Probation Office (also argued by Backstrom) and that the value of the bribe should only be the amount of the bribe. By his calculation, Scruggs claims a 30-37 month range is called for by the guidelines. While Scruggs does acknowledge his offense, the document is remarkably void of any sense of remorse, and he continues to argue about his role in the conspiracy, as he did at his plea hearing. Whatever the merits of his arguments, the tone of the memorandum is not likely to impress Judge Biggers.
The government response (to both Dickie Scruggs and Sid Backstrom) argues that the intent of the bribe determines the benefit and that even at the $50,000 bribe amount Scruggs’ guideline would be 46-57 months; further, that Backstrom’s argument is moot because even just using the bribe amount, his range would more than the 30 month cap under his plea agreement. The government is seeking the maximum allowed under the plea agreements for both defendants (Sun Herald).
UPDATE: The government has subpoenaed John Jones’ attorney Grady Tollison to testify at the sentencing hearing. He expects to be asked about the amount of legal fees at stake in Jones v. Scruggs (Sun Herald).
Raffaello Follieri, recently-dumped longtime beau of Anne (Agent 99) Hathaway, has been charged with with one count of conspiracy, six counts of wire fraud, and five counts of money laundering in connection with a real estate investment scheme he operated from 2005 to 2007. The DOJ press release (.pdf) alleges that Follieri solicited investors by claiming that he had close connections with the Vatican that enabled him to purchase unwanted Catholic Church properties in the US at a substantial discount, but that in reality he only had limited Vatican connections and no such authority. He allegedly converted investor funds for his personal use, including a $37,000-a-month lease on his Manhattan apartment. Follieri made an initial appearance on Tuesday before US Magistrate Judge Henry Pitman in Manhattan; he did not enter a plea (Reuters).
A three-judge panel of the US Court of Appeals for the Seventh Circuit on Wednesday unanimously affirmed the mail fraud convictions of former Hollinger Inc. CEO and chairman Conrad Black, as well as the convictions of his co-defendants Jack Boultbee, Peter Atkinson and Mark Kipnis.The court also upheld Black’s obstruction conviction which arose from his removal of boxes of documents from his Toronto office in violation of a court order. The Canadian Press covers the decision here. Black was sentenced in December to 78 months in prison; he began serving his term on March 3 after the Seventh Circuit denied his request to remain free on bond during his appeal. Boultbee, Atkinson and Kipnis have been free on bond during the appeal.
US District Judge Leonard Sand on Wednesday reduced the sentences of Adelphia Communications founder and former CEO John Rigas and his son, former Adelphia CFO Timothy Rigas by three years each. Sand resentenced John Rigas, now 83, to 12 years in prison and Timothy Rigas to 17 years in prison. The resentencing came about after the US Circuit Court of Appeals for the Second Circuit in May 2007 reversed their conviction on one count of bank fraud, citing insufficient evidence. Judge Sand ruled that “a minimal adjustment is appropriate” in light of that reversal. An attorney for the Rigases said they plan an immediate appeal, calling the revised sentences “harsh beyond measure.” However, the Second Circuit did uphold their convictions on 22 of 23 counts and the US Supreme Court in March 2008 rejected their appeals without comment (Reuters, earlier here and here ).
In Camden, New Jersey on Monday, Glyn Richards of Haddon Heights pleaded guilty before US District Judge Renée Marie Bumb to a two-count information charging him with mail fraud and money laundering in connection with the operation of a Ponzi scheme. Richards operated a company called Air Freight Logistics. He allegedly solicited investors by telling them his company had Defense Department contracts to ship military equipment overseas and needed funds to pay up-front costs, typically promising 44% return on a 120-day $25,000 investment. However, his business never had any such contracts and he was simply operating a typical Ponzi scheme. The overall loss amount has not been determined but he is said to have taken in over $10 million from more than 100 investors. Sentencing is scheduled for October 14 (Philadelphia Inquirer, DOJ).
Modern Continental Corporation, the largest contractor on Boston’s Big Dig project, was charged late last Friday in US District Court in Boston with making false statements in connection with its execution of construction documents certifying the quality of the work it performed on certain contracts, submitting false time and materials slips on contracts, and with wire fraud. The DOJ press release alleges that the company was aware of numerous defects including the one that caused the accident which killed a motorist in 2006 after a ceiling panel fell. The company called the charges “completely unfounded and without merit.” The charges were in the form of a 49-count information. Although an information usually indicates a forthcoming plea, in this case it came after negotiations broke down (Boston Globe).
Yesterday Modern Continental filed Chapter 11 bankruptcy in Boston. A bankruptcy lawyer not involved in the case called the filing “skeletal” and believes it was rushed because of the criminal charges (Boston Globe).
Recent results in the DOJ and FBI’s “Operation Bot Roast”:
Robert Matthew Bentley of Panama City, Florida, on June 11 was sentenced to 41 months in prison and ordered to pay $65,000 in restitution by US District Judge Richard Smoak in Pensacola. Bentley pleaded guilty in March to conspiracy and computer fraud counts; he admitted overloading Newell Rubbermaid’s computer network by using his botnet to install ad-serving software on over 100 computers; he was paid to do it by a now-defunct Dutch adware company. Others companies were targeted and unnamed co-conspirators are under investigation (Techworld, DOJ).
Gregory King of Fairfield, California on June 10 pleaded guilty to two counts of transmitting code to cause damage to a protected computer before US District Judge Lawrence Karlton in Sacramento. King admitted using a 7,000-computer botnet he controlled to launch distributed denial-of-service (DDoS) attacks against Killanet and CastleCops. The latter is a well-respected online security community which specializes in analyzing, exposing and fighting malware, phishing and other computer security concerns. King agreed to serve two years in prison, although the court is not bound by the recommendation; sentencing is scheduled for September 3 (Wired, DOJ).
In US District Court in Covington, Kentucky on Monday, jury instructions were given and closing arguments were completed in the trial of fen-phen class action attorneys William Gallion, Shirley Cunningham Jr. and Melbourne Mills Jr. The three attorneys were indicted in June 2007 on one count each of conspiracy to commit wire fraud. They allegedly pocketed $65 million more than they were entitled to under terms of the class action settlement with American Home Products on behalf of 440 Kentuckians harmed by the drug. The Louisville Courier-Journal has a overview here.
US District Judge Neal Biggers on Monday denied Sid Backstrom’s motion to reconsider his June 20th order allowing prior press and public access to sentencing recommendation letters written on behalf of the US v. Scruggs et al defendants (earlier). This time he cites US v. (Scooter)Libby as a public interest precedent and also cites US v. Halat, a federal murder case from Mississippi. Barring further objections, the Sun Herald will be allowed to view the letters on Wednesday and to make them public in advance of this Friday’s sentencing of Backstrom and Dickie Scruggs (h/t folo). UPDATE: at least three others will be granted access, including Tom (NMC) Freeland of folo. Stay tuned.
Former Chicago Bears fullback Roland Harper pleaded guilty last Tuesday to one count of mail fraud for allowing his landscaping business to be used as a front by a white-owned firm to land contracts from the Chicago Public Schools that were set aside for minority-owned businesses. Harper, who is black, admitted that he allowed the real contractor, Monahan Landscape, to use his Rohar Construction to secure $1.5 million in contracts between 2003 and 2006. Harper’s plea came six days after Aidan Monahan, owner of Monahan Landscape and a Democratic Party fund-raiser, pleaded guilty to one count of mail fraud in the case.
Both pleas were entered before US District Judge John Darrah. Harper will be sentenced on October 14 and prosecutors will ask for approximately 16 months in prison. Monahan has agreed to pay $100,000 restitution and is also facing prison time; his sentencing is scheduled for September 30 (Chicago Sun-Times on Harper, Monahan).
Wasting no time, US District Judge Neal Biggers on Friday granted the Sun Herald’s motion to allow prior press and public access to presentencing recommendation letters written on behalf of Dickie Scruggs and his co-defendants (earlier). The paper will be allowed to examine the letters on Wednesday June 25, two days prior to the sentencing of Dickie Scruggs and Sid Backstrom (story, order). This should make for an interesting week. UPDATE (h/t dmwriter via folo): Backstrom’s attorneys have now asked Judge Biggers to reconsider.
In other Scruggs news, US District Judge L.T. Senter on Monday denied the Rigsby sisters’ motion to reconsider his May 19 order disqualifying Kansas City lawyers Todd Graves, Chip Robertson and their respective law firms from Ex rel. Rigsby and granted them 45 days to get new counsel or proceed pro se (Sun Herald).
Judge Senter on Friday also upheld US Magistrate Judge Robert Walker’s May 15 order compelling Dickie Scruggs to turn over a raft of documents in the McIntosh v. State Farm case (earlier); h/t Y’all Politics.
Sentencing for former Refco Chairman and CEO Phillip Bennett is now rescheduled (again) for July 3 before US District Judge Naomi Reice Buchwald in Manhttan. Bennett pleaded guilty in February to conspiracy, wire fraud, bank fraud, money laundering and making false SEC filings (earlier). Prosecutors are seeking a sentence in the same range as the 25 year sentence of former WorldCom CEO Bernie Ebbers. Bennett’s attorneys are asking for a non-guidelines sentence in the range of the 10 year sentence former Drexel Burnham Lambert junk bond ace Michael Milken received, noting Bennett’s cooperation with shareholders in their civil suit (New York Law Journal).
Paragraph 32 of the indictment of former Bear Stearns hedge fund traders Ralph Cioffi and Matthew Tannin has this alleged quote from Tannin to another member of the portfolio management team: “[b]elieve it or not – I’ve been able to convince people to add more money. . . .” Bess Levin at Dealbreaker thinks she knows what that really means (NSFW language).
Debra Ryan, the girlfriend of AWOL convicted Bayou Group co-founder Samuel Israel III, was arrested yesterday and charged with aiding and abetting his failure to turn himself in. The charge carries a maximum 10 year sentence. She was released on bond after an appearance before US Magistrate Judge Lisa Margaret Smith in White Plains, New York. Karen Freifeld’s Bloomberg story describes her apparently admitted role in helping Israel, who may have escaped on a motor scooter. Until yesterday she had repeatedly denied any knowledge of what happened (earlier here and here).
Former UBS banker Bradley Birkenfeld pled guilty in Miami federal court yesterday to a tax-related Klein Conspiracy count. He is cooperating with the government in its probe of UBS. This is going to be a very big case. Money.com has the story here.
We incorrectly reported yesterday, based on the original AP story, that former Bear Stearns hedge fund traders Ralph Cioffi and Matthew Tannin were in the process of surrendering themselves to authorities. Instead, they were arrested by the FBI and hauled off to court, perp-walk style, with the full panoply of press coverage. This is a despicable practice in white-collar cases unless defendants pose a flight risk. But where non-violent offenders, innocent until proven guilty, are sure to be released, the practice of arresting and parading them in front of the press so FBI agents and prosecutors can get their jollies is pathetic. Tom Hays’s AP story is here in today’s Washington Post. Somebody needs put to put an end to this practice.
According to the Wall Street Journal and AP’s Tom Hays, two former Bear Sterns hedge fund managers are in the process of turning themselves in to the authorities and will be charged today in the Eastern District of New York with Securities Fraud. The AP story is here. Although I have not seen the Indictment, this morning’s WSJ story here makes the prosecution case look pretty weak.
In a motion filed on Tuesday, the Sun Herald asked US District Judge Neal Biggers to allow prior press and public access to presentencing recommendation letters written on behalf of Dickie Scruggs and co-defendants Zach Scruggs, Sid Backstrom, Tim Balducci and Steve Patterson. The motion claims a legitimate public interest and cites a Ninth Circuit case in support. Dickie Scruggs and Backstrom are to be sentenced on June 27, Zach Scruggs on July 2. Sentencing has not been scheduled for Balducci and Patterson (motion, story).
Judge Biggers already noted that the court had received numerous letters solicited by the defendants asking for leniency, and ruled that each defendant would only be allowed three character witnesses each. However many letters there are, Judge Biggers is obviously not going to let the sentencing hearings be turned into a sideshow. But it certainly would be interesting to see which recipients of campaign contributions, other public officeholders and community leaders have recommended leniency for defendants who admittedly tried to bribe a judge.
A federal jury in Dallas on Friday convicted longtime blowhard self-proclaimed civil rights activist Darren Reagan on five counts of theft of public money for collecting $45,000 in rent subsidies from the Dallas Housing Authority which he wasn’t entitled to. Despite signing documents stating that renting to a relative is prohibited under Section 8 rules and affirming that he had no blood, marital, or other familiar relationship to his tenant, Reagan rented a house to his mother-in-law and collected rent subsidies from 2002 to 2007. He claimed he never read the fine print. Then when investigators approached his mother-in-law and she admitted they knew what they were doing was illegal, the Housing Authority notified him in early 2007 that benefits were terminated. Reagan claimed he never got the letter although he admitted receiving every check sent to the same PO box address. And when checks were mistakenly sent for several months after the termination, Reagan cashed them instead of depositing them. Reagan faces a statutory maximum of 10 years on each count. Sentencing is scheduled for October 4 before US District Judge Barbara Lynn (Dallas Morning News, DOJ).
But this is only the beginning of Reagan’s legal woes. He is one of 14 persons indicted last fall in a major bribery and extortion scandal at Dallas City Hall. He is charged with one count of conspiracy to commit extortion, two counts of extortion by public officials, one count of conspiracy to commit money laundering and four counts of tax evasion for allegedly helping extort money from a developer on behalf of former Dallas Mayor Pro Tem Don Hill. That trial is scheduled to begin in January 2009.
A panel of the U.S. Court of Appeals for the D.C. Circuit has reversed all counts of conviction against Jack Abramoff ’s friend, and former GSA Chief of Staff, David Safavian. Safavian had been convicted of Title 18 U.S.C. Section 1001 false statements to the GSA and obstructing a GSA investigation. The GSA was investigating Safavian’s attendance at an Abramoff-sponsored golf outing to Scotland. The Safavian Opinion was written by Judge Raymond Randolph. The Section 1001 concealment counts were reversed based on insufficient evidence. The Court ruled that Safavian had no duty to disclose all the details of Abramoff’s relationship to the GSA when Safavian sought a GSA ethics opinion prior to the trip and when he later spoke to a GSA agent investigating the trip. The Court firmly rejected the government’s argument that, once Safavian started talking about the trip, he was under a duty to disclose all relevant facts about it. The Court reaffirmed that a person cannot be guilty of a Section 1001 concealment offense unless he is under a duty to disclose the concealed fact. Three other counts, dealing with allegedly affirmatively false statements by Safavian, were thrown out because the District Court failed to allow expert testimony profferred by the defense on the meaning of “doing business” within the government contracts field. Safavian argued that he told the truth in informing GSA that Abramoff was not doing business with the agency at the time of the Scotland trip. Although Abramoff had informally inquired about two GSA properties to Safavian, he did not bid or recieve contracts on those or any other GSA properties. The expert would have testified that in the government contracts field, such informal inquiries do not constitute doing business. The Court ruled that this testimony would have been relevant to Safavian’s state of mind and to whether he intended to mislead the GSA. Congratulations to Lawrence Robbins who argued the case on appeal.
On June 10 in Cleveland, US District Judge Donald C. Nugent sentenced Kent S. Andrews of Middleburg Heights, Ohio to 33 months in prison for defrauding Cisco Systems of almost $2 million. Andrews pleaded guilty in February to a criminal information charging him with a single count of wire fraud. He admitted running a scheme which exploited a Cisco program allowing service contract holders to get replacement networking parts and equipment without having to return the defective equipment for another 30 days. Andrews managed to get Cisco to ship him 241 pieces of equipment between December 2003 and May 2006 even though he didn’t return any defective equipment because he didn’t own any and wasn’t authorized to submit claims under the program anyway. He then turned around and sold the equipment on eBay. Why Cisco’s auditors took so long to find this is not known (DOJ).
James Sandlin of Sherman, Texas, former business associate of US Rep. Rick Renzi (R-Ariz.) who was indicted with Renzi in February (earlier), was convicted June 11 by a federal jury in Texas in an unrelated case on two counts of submitting a false statement to a federally insured financial institution. Sherman was indicted in November 2007 for submitting financial statements to the Independent Bank of Sherman which allegedly failed to disclose $996,000 in loans from a retired Sherman couple. The maximum penalty on each count is 30 years in prison; a sentencing date was not disclosed (Houston Chronicle, DOJ).
Sandlin has pleaded not guilty in the Renzi case, which is scheduled to go to trial on October 14. He is named in 27 counts in that indictment including conspiracy, wire fraud and honest services wire fraud, money laundering and extortion under color of official right. He and Renzi are accused of using Renzi’s office to extort investors trying to obtain mineral rights.
Former DOJ civil rights division head Bradley Schlozman is apparently the subject of the first grand jury referral in the investigation arising from the 2006 US Attorneys scandal. The referral of Schlozman, who also served for a year as interim USA for the Western District of Missouri after the firing of Todd Graves, is said to involve possible perjury, and that may stem from his 2007 testimony before the Senate Judiciary Committee which sparked some outrage over his admittedly partisan tactics. The ongoing investigation of the scandal is being handled by the OPR and the OIG (WSJ, WaPo). Scott Horton at Harper’s offers perspective here.
William Dundon, a spokesman for the US Marshals Service, on Monday said that “suicide has been ruled out” in the case of AWOL convicted Bayou Group co-founder Samuel Israel III (earlier here and here). However, no explanation was given by Dundon or USA Michael Garcia for the change in status (Bloomberg).
Meanwhile, on eBay, bidding on a genuine Sam Israel III Business Card has reached $46.00 with two days left.
In a letter sent on Monday to Karl Rove’s attorney, US Rep. John Conyers (D-Mich.) made it clear that Rove’s anticipated July 10 testimony before the House Judiciary Committee cannot be limited to questions about the prosecution of former Alabama Governor Don Siegelman. Conyers’ letter states that “the Siegelman matter, other selective prosecution matters, and the U.S. Attorney firings are clearly related as part of the concerns regarding politicization of the Justice Department under this Administration that the Committee has been investigating.” The letter was also signed by Rep. Linda Sanchez (D-Calif.), chair of the administrative law subcommittee (h/t White Collar Crime Prof Blog).
The law firm now known as Milberg LLP reached a non-prosecution agreement on Monday with the DOJ which settles the criminal charges against the firm. The former Milberg Weiss Bershad & Schulman LLP was indicted in 2006 on counts including conspiracy, racketeering, mail fraud, money laundering and filing false tax returns. Milberg admitted wrongdoing by its former principals Melvyn Weiss, William Lerach, David Bershad and Steven Schulman involving illegal kickbacks paid to class action plaintiffs in 165 cases over 25 years and agreed to pay $75 million in fines. The government said it believed that no current partners engaged in or knew about the illegal scheme.
Milberg also admitted llegally paying class action expert witness John Torkelsen on a contingency basis and paying kickbacks to several stockbrokers who referred clients to serve as plaintiffs. The firm also agreed to compliance monitoring for two years (NY Law Journal, DOJ via LawFuel).
James A. Brown, one of three former Merrill Lynch executives still possibly facing retrial in the Enron Nigerian Barge case after their convictions were reversed on appeal (here and here ), is now asking that a former Enron Task Force prosecutor be investigated for misconduct on grounds that he wrongly withheld exculpatory evidence and knowingly misled the judge and jury in the November 2004 trial. And the former prosecutor? None other than Matthew Friedrich, Acting Assistant AG of the Criminal Division of the DOJ. Brown has asked Senate Judiciary Committee, the OPR and the Virginia Bar to investigate Friedrich’s conduct, and Brown’s attorney Sidney Powell said that similar complaints will be made against other prosecutors in the case (Bloomberg).
Joy Jackson of Fort Washington, Maryland, owner of the Metropolitan Money Store of Lanham, Maryland, was indicted on Thursday along with seven others on 25 counts including conspiracy, mail fraud and money laundering. The others include Jennifer McCall, said to be the architect of the scheme, her husband Clifford McCall and Jackson’s husband Kirk Fordham. The charges stem from a so-called foreclosure rescue scheme operated by the defendants which allegedly defrauded homeowners and lenders out of $35 million. In such a scheme, homeowners are persuaded to temporarily turn over titles to their homes so their credit can be repaired. Prosecutors say that the defendants used paid straw buyers with falsified credit histories to to obtain fraudulent new mortgages based on inflated appraisals, borrowed against the equities and never paid the mortgages. The proceeds were allegedly diverted to fund the defendants’ lavish lifestyles (Baltimore Sun, DOJ).
In Tampa on Wednesday, US District Judge Steven Merryday sentenced Luis Uribe to 102 months in prison for his role in a $6 million “equity stripping” mortgage fraud scheme that included identity theft. Uribe, a licensed mortgage broker, pleaded guilty on March 27 to one count of wire fraud and one count of aggravated identity theft. He was accused of obtaining 32 mortgage loans under false pretenses through a shell contracting company, using stolen identities, on the premise of additional construction work to be done, but no work was ever performed by the contracting company (earlier, DOJ, Tampa Tribune). On March 28, licensed title agent Andrea Batronie was sentenced to 30 months in prison for her role in the same scheme. In January, Uribe was sentenced to 34 months in prison in US District Court in Chicago for his role in a similar scheme.
Attorneys for Sid Backstrom on Wednesday filed a 16-page objection to the presentencing report from the US Probation Office. While the report itself has not been made public, Backstrom has objected to the calculation that he would have received $5.3 million from a successful bribe of Judge Henry Lackey and has disputed the claim that he “recruited, supervised or managed” co-defendants Tim Balducci and Steve Patterson. Backstrom and Dickie Scruggs are to be sentenced on June 27 (Daily Journal). The attempted bribe was to get Judge Lackey to send Jones v. Scruggs to arbitration, not to decide Jones’ $26.5 million suit in Scruggs’ favor, so the objection is at least understandable though not convincing.
The DJ story also says the motion “suggests the PSR seeks a punishment three times greater than he thinks it should be.” Since the maximum sentence Dickie Scruggs can receive under his plea agreement is 5 years in prison, and since Backstrom’s plea agreement allows no more than half of Scruggs’ sentence, this suggests either that Backstrom is pushing for a 10 month sentence or that the Probation Office is recommending sentencing enhancements even though both plea agreements have been accepted by the court.
In Scruggs Katrina Group news, US District Judge L.T. Senter on Thursday denied State Farm’s move to disqualify the Provost-Umphrey law firm from representing former SKG clients in the Shows v. State Farm RICO lawsuit (earlier), but with stipulations to insure that there will be no participation, fee sharing or any kind of financial arrangement between Provost-Umphrey and any of the disqualified SKG firms (Sun Herald, Judge Senter’s ruling).
As expected, Emperors Club VIP operator Mark Brener pleaded guilty on Thursday, becoming the third defendant to reach a plea agreement in the case which snared Eliot Spitzer. Brener pleaded guilty to conspiracy to commit prostitution offenses and conspiracy to commit money laundering before US District Judge John Sprizzo in Manhattan. The plea agreement calls for Brener to serve 24 to 30 months in prison but does not stipulate any requirement to cooperate with prosecutors. Sentencing is scheduled for September 16 (Reuters).
In Manhattan on Tuesday, US District Judge Leonard Sand set a trial date of April 6, 2009 in the case of Joseph Collins, former longtime attorney for Refco Inc. Collins was indicted in December 2007 on 11 counts including conspiracy, securities fraud, wire fraud, bank fraud and making false statements to the SEC. The charges arose in connection with the October 2005 collapse of the company which caused investor and partner losses estimated at $2.4 billion. Collins, a partner at Mayer Brown LLP in Chicago, is accused of creating fraudulent documents to help hide Refco’s losses from investors, auditors and and Thomas H. Lee Partners, which had purchased a majority interest in Refco (Reuters).
Former Refco Chairman and CEO Phillip Bennett and CFO Robert Trosten pleaded guilty in February, and former President Tome Grant was convicted by a jury in April. Bennett’s sentencing, originally scheduled for May 20, has been moved to June 19; the New York Law Journal recently reported that Bennett has been cooperating with shareholders in their civil suit; these are the same investors he has admitted defrauding, and he is a defendant in that suit. US District Judge Naomi Reice Buchwald, who will sentence Bennett, has been informed of his cooperation; he faces a possible maximum of 315 years in prison.
In White Plains on Wednesday, US District Judge Kenneth M. Karas issued an arrest warrant for the AWOL convicted Bayou Group co-founder Samuel Israel III. Interpol has been notified and a wanted poster is also being prepared. Perhaps the authorities have realized that in M*A*S*H (the movie), “Painless” The Dentist didn’t actually commit suicide (WNBC).
Another plea is expected to be entered today in connection with the Emperors Club VIP escort service patronized by Eliot “Client 9″ Spitzer: Mark Brener, the man who operated the service, will plead guilty to money laundering, prostitution and conspiracy. His will be the third guilty plea, follwing booker Temeka Lewis and operations manager Cecil “Katie” Suwal, who apparently is Brener’s girlfriend. CBS reports that Brener was not offered a plea deal and speculates that Spitzer will be charged, while AP says Brener negotiated a plea agreement similar to Suwal’s.
Meanwhile, Reuters and other sources report that Spitzer is courting investors for his next career: operating a vulture fund targeting distressed real estate. A self-proclaimed fighter for the people would seek his fortune off the misfortune of former constituents? How predictable.
Samuel Israel III, co-founder of now-defunct hedge fund Bayou Group LLC who was sentenced to 20 years in prison in April, has disappeared. He was scheduled to report to a federal prison in Massachusetts on Monday but failed to show, and his 2006 GMC Envoy was found in Westchester County, New York by the Bear Mountain Bridge with keys in the ignition and “suicide is painless” written in the dust on the hood. Has he committed suicide, as Kirk Wright recently did? Or has he pulled a Rebecca Parrett? No body has yet been found. WNBC reports that a surveillance camera appears to show a second vehicle pulling alongside the Envoy but that it’s not clear if he entered it. AP reports that the FBI, state police and victims of his fraud are skeptical. Bloomberg has more.
Levonda Selph, a Virginia resident and retired Army National Guard lieutenant colonel, pleaded guilty on Tuesday in US District Court in DC to a two count criminal information charging her with conspiracy and bribery. She admitted that when she was serving in Baghdad in 2005 and heading a selection board that awarded an annual $12 million contract to build and operate Defense Department warehouses in Iraq, she leaked confidential information about the contract to an unnamed contracting company and conspired with the owner to rig the bidding. The contractor was allowed to submit bids in the names of six companies he controlled to create the appearance of bid competition. In return, she accepted a $4000 payment and a trip to Thailand worth $5000. Selph agreed to cooperate with prosecutors in the continuing investigation and agreed to sentencing guidelines calling for up to 33 months in prison. Sentencing is scheduled for October 14 before US District Judge Reggie Walton (AP, DOJ).
On June 2 in Raleigh, North Carolina, former Brunswick County (Cape Fear area) Sheriff Ronald Hewett pleaded guilty to a criminal information charging him with one count of obstruction of justice, specifically that he obstructed a federal grand jury investigation into allegations of corruption in his office. The federal grand jury began investigating him in December 2006 amid allegations that he had deputies perform manual labor on his property, demanded that deputies campaign for him and failed to prosecute prominent residents. After the grand jury subpoenaed 25 former and current sheriff’s office employees last June, Hewett reportedly harrassed, threatened and intimidated them before and after their grand jury testimony. He resigned this April 15 after being suspended March 27 and indicted March 31 on state charges of embezzlement and obstruction. US District Judge W. Earl Britt accepted Hewett’s plea and scheduled sentencing for September 8. Hewett could receive up to 10 years in prison (Wilmington Star-News, DOJ).
In Baltimore on Thursday, Curtis Jones of Annapolis pleaded guilty to one count of accepting an illegal gratuity for the performance of his official duties. Jones was a DC-based equipment program manager for the FBI whose duties included negotiating and approving a purchase agreement for up to $2 million in new shredders to meet new national security standards for classified documents. He admitted accepting a Caribbean cruise valued at $7500 from an unnamed company shortly after approving their contract. That could cost him up to two years in prison. US District Judge Benson Everett Legg scheduled sentencing for September 18 (Annapolis Capital, DOJ).
Carleen Hawn thinks it could happen, and Prof. Malcolm Salter likes Jeff Skilling’s chances (Financial Week).
Andrew Yao of Bryn Mawr, Pennsylvania, former CEO and sole owner of bankrupt Delaware-based Student Finance Corp., last Wednesday pleaded guilty in US District Court in Philadelphia to 10 counts including wire fraud, mail fraud, making false statements and money laundering; the plea came the day his trial was to start. Yao admitted lying about his income and assets between 1998 in 2002 to obtain $40 million in loans for his company and personal expenses including his jet and a $3 million mortgage refinance. Prosecutors said the charges carry a guideline sentence of about four to five years; US District Judge Petrese Tucker released Yao on bond and set sentencing for September 5. Yao was convicted of bankruptcy fraud last year in US District Court in Delaware last year and was sentenced to one year and one day in prison. He has been free on bond pending appeal in that case, and he faces civil fraud suits in connection with the bankruptcy, which left over $400 million in debt (AP/Forbes, Journal News).
In Madison on Wednesday, US District Judge Barbara Crabb sentenced Daniel TePoel of Barnes, Wisconsin to 11 1/2 years in prison for defrauding 22 investors of more than $2.5 million. TePoel was convicted by a jury in March on one count of conspiracy, four counts of mail fraud, two counts of wire fraud and one count of lying to the FBI. TePoel and his business partner Gary Milosevich allegedly solicited the money from friends and neighbors over a ten year period promising high rates of return at low risk in a purported prime bank scheme but never actually invested any funds. Instead, the funds were converted for personal use, including travel and personal living expenses and construction materials and equipment for a failed resort project in Grenada. Both men were indicted in 2007 but Milosevich remains at large. TePoel, who represented himself, blamed everything on his former partner (Capital Times, DOJ).
A jury in US District Court in Providence, Rhode Island on May 30 acquitted former CVS senior VP John Kramer and former CVS VP Carlos Ortiz of bribing former Rhode Island state senator John Celona. Kramer and Ortiz were indicted in January 2007 on one count of bribery, one count of conspiracy and 21 counts of mail fraud for offering Celona a $1000 per month consulting job which prosecutors alleged was a scheme to influence his votes on legislation favorable to the pharmacy chain. Celona, who was sentenced to 30 months in prison in 2007 after pleading guilty to public corruption corruption charges in 2005, was the prosecution’s star witness.
But the jury obviously did not believe Celona or the government’s case. Jurors took only 90 minutes to acquit Kramer and Ortiz on all counts. Afterwards, Ortiz’ wife blasted prosecutors for “putting together this sham case” and Kramer refused to shake USA Robert Corrente’s hand when he offered it (Providence Journal, Reuters).
Reports from the Thursday hearing before a three-judge panel of the Seventh Circuit in Conrad Black’s appeal (earlier) indicate that oral arguments did not go well for Black’s defense team. As expected, Black’s appellate attorney Andrew Frey argued that Black didn’t intend to obstruct justice when he removed boxes of documents from his Toronto office in violation of a court order, that the money Black and his co-defendants took was a legimate arrangement that didn’t hurt Hollinger shareholders and that US District Judge Amy St. Eve erred in giving the jury the so-called “ostrich” instruction. But the judges, especially US Appeals Court Judge Richard Posner, were unusually aggressive in their questioning of Frey. Former AUSA Eric Sussman, who led the team that prosecuted Black, said he heard “a lot more skepticism from the Court of Appeals than in the ordinary appeal.” Posner called the document removal “bizarre” and said “the bulk of the evidence has to do with pretty naked fraud” (Chicago Tribune, Canadian Press).
In February, US District Judge Roger Vinson dismissed with prejudice the US v. Scruggs Northen District of Alabama case in which Dickie Scruggs was being prosecuted for criminal contempt of court (earlier). While Judge Vinson clearly did not believe Scruggs,he ruled that Scruggs was not criminally responsible.
US District Judge William Acker is clearly peeved by that ruling and more than peeved at Scruggs and the Rigsby sisters. On Thursday, he found Scruggs and the Rigsbys in civil contempt in the case and ordered them to pay $65,000 in attorney fees to E. A. Renfroe within 30 days. His order makes it clear that proceedings will not be stayed unless the Eleventh Circuit orders it. But that’s the tame part. His memorandum is a withering and intemperate attack on Scruggs, the Rigsbys and Mississippi AG Jim Hood. Some examples: what Scruggs did is called “too cute by half.” Hood is called a so-called ‘law enforcement official’.” “Scruggs and the Rigsbys were as ‘joined-at-the-hip’ as any set of Siamese twins.”
While all that may well be true, it’s shocking to see it officially expressed that way. It almost seems like an attack deliberately timed to embarrass Scruggs three weeks ahead of his sentencing. Judge Acker has let his anger get the best of him.
The heat from the OPR and congressional investigations into the Siegelman/Scrushy case may be having some effect. The puppets prosecutors who were appealing the 88 month prison sentence for former Alabama Governor Don Siegelman and the 82 month sentence for former HealthSouth CEO Richard Scrushy as too lenient have suddenly decided to drop their cross-appeal. The motion filed with the Eleventh Circuit earlier this week gives no expanation, simply saying “the government has elected not to proceed with its cross-appeal as to either defendant.” Unfortunately, they will still be opposing the defendants’ appeals (AP). Scott Horton at Harper’s has an overview of recent events in the case here.
The Chicago Sun-Times has it here.
A three-judge panel of the US Court of Appeals for the Seventh Circuit will hear oral arguments today in the appeal of former Hollinger Inc. CEO and chairman Conrad Black, as well as the appeals of his co-defendants Jack Boultbee, Peter Atkinson and Mark Kipnis. Black was convicted last July on three counts of mail fraud and one count of obstruction of justice; he and his three co-defendants were accused of defrauding Hollinger and its shareholders of $60 million. He was sentenced in December to 78 months in prison; he began serving his term on March 3 after the Seventh Circuit denied his request to remain free on bond during his appeal (Canadian Press).
One day after indicted Rep. William Jefferson (D-La.) endorsed Sen. Barack Obama for President, three of Jefferson’s relatives were charged in a 31-count federal indictment made public on Wednesday in New Orleans. Betty Jefferson, a publicly elected district tax assessor, her brother Mose Jefferson and her daughter Angela Coleman have been indicted on counts of conspiracy to commit mail fraud, federal program fraud, aggravated identity theft, substantive program fraud, mail fraud and conspiracy to commit money laundering, for allegedly looting charitable organizations under their control (Times-Picayune, DOJ).
After 13 days of deliberation, a federal jury has convicted Illinois developer and Democratic fundraiser Tony Rezko on six counts of mail fraud, six counts of wire fraud, two counts of aiding and abetting bribery and two counts of money laundering, while acquitting him three counts of wire fraud, four counts of aiding and abetting bribery and one count of attempted extortion. The charges arose from a series of influence peddling and kickback schemes. Rezko’s ties to Illinois Gov. Rod Blagojevich were at issue in the trial, but his connections to Sen. Barack Obama will surely be campaign fodder in the Presidential race. Rezko was taken into custody immediately; US District Judge Amy St. Eve scheduled sentencing for September 3 (Chicago Tribune/AP).
Cecil “Katie” Suwal, who ran the daily operations of the Emperors Club VIP escort service patronized by Eliot “Client 9″ Spitzer, pleaded guilty yesterday to a two-count federal information charging her with conspiracy to commit money laundering and conspiracy to promote prostitution. The former charge is based on her admission that she opened a series of bank accounts to launder proceeds from the club. Suwal entered her plea before US District Judge Barbara S. Jones in Manhattan. She remains free on bond until her sentencing in September. The plea agreement calls for her to receive 21 to 27 months in prison and does not mention a requirement for her to cooperate with prosecutors. Suwal’s plea follows booking agent Temeka Lewis’ guilty plea last month (earlier); still no word on possible charges against Spitzer (AP).
Due to a scheduling conflict, US District Judge Neal Biggers on Tuesday moved the sentencing date for Dickie Scruggs, Zach Scruggs and Sid Backstrom from July 2 to June 27. Dickie Scruggs moved to reschedule because his lead attorney John Keker had a scheduling conflict, and the other defendants did not object (AP).
UPDATE (h/t folo): It seems the chip doesn’t want to follow the old block. Zach Scruggs objected to moving up sentencing five days, so his sentencing date stays at July 2.
The Rigsby qui tam “trailer lawyers” from Kansas City have filed a motion to reconsider their disqualification from Ex rel. Rigsby by US District Judge L.T. Senter (earlier). It’s yet another over-the-top motion, this time attacking Judge Senter as well as State Farm. Rossmiller’s analysis is well worth the read.
In McIntosh v. State Farm, State Farm responds to Scruggs’ objections to US Magistrate Judge Robert Walker’s order requiring him to turn over a host of documents.
In all the much-needed publicity surrounding the politically motivated prosecution of former Alabama Governor Don Siegelman, little attention has been paid to the other defendant: former HealthSouth CEO Richard Scrushy, whose prosecution in this case can easily be seen as payback for his 2005 acquittal on all counts in his accounting fraud case. Although Siegelman was granted bond in late March pending his appeal, Scrushy remains in prison serving a term of 6 years and 10 months; like Siegelman, he was taken into custody immediately after his sentencing last June.
However, late Monday afternoon attorneys for Scrushy filed an apellate brief with the US Court of Appeals for the Eleventh Circuit in Atlanta, asking the court to reverse his conviction or order a new trial. The appeal covers six claims: the government’s failure to establish a quid pro quo, juror misconduct, failure of US District Judge Mark Fuller to disclose conflict of interest, improper denial of Scrushy’s jury composition challenge, admission of erroneous and prejudicial hearsay from a non-witness and the barring of the bribery counts by the statute of limitations. An AP article has more here.
John Albaugh, former chief of staff for former US Rep. Ernest Istook (R-Okla.), pleaded guilty on Monday to a one count criminal information charging him with conspiracy to commit honest services wire fraud. His plea was entered before US District Judge Ellen Segal in DC. Albaugh admitted receiving things of value from an associate of convicted lobbyist Jack Abramoff in exchange for official favors. The lobbyist was not named but it appears to be Kevin Ring, a former aide to Rep. John Doolittle (R-Calif.) who later went to work for Abramoff.
Albaugh has agreed to cooperate with prosecutors. The plea agreement calls for 18 to 24 months in prison but it could be reduced depending on the level of cooperation. Istook said he was “as surprised and as shocked as anyone” and claimed that he is not a target in the continuing investigation (AP,DOJ).
Anthony Tesvich of Atlanta, a former Home Depot global products buyer, was indicted on Thursday on charges of tax evasion and conspiracy to commit wire fraud. An attorney for Tesvich said he plans to plead guilty. The charges stem from an alleged kickback scheme he operated: he is accused of taking payoffs from foreign flooring vendors in exchange for ensuring that their products were placed in Home Depot stores. The tax evasion counts allege a total of over $1.4 million in unreported income from the scheme in 2003, 2004 and 2005. He left the company in 2005 and allegedly continued the scheme into 2007 by paying kickbacks to two flooring buyers on behalf of the suppliers. The two buyers were fired last year but have not yet been charged (DOJ, Atlanta Journal Constitution).
Former Credit Suisse investment banker Hafiz Muhammad Zubair Naseem was sentenced on Friday to 10 years in prison by US District Judge Robert Patterson in Manhattan. A jury convicted Naseem in February on one count of conspiracy and 28 counts of insider trading for tipping off a colleague in Pakistan who traded on inside information of upcoming mergers, resulting in a gain of $7.5 million (earlier). The colleague, Ajaz Rahim, is fighting extradition from Pakistan (Bloomberg).
Melvyn Weiss, pioneer of shareholder class action lawsuits and former name partner of the firm now known as Milberg LLP, was sentenced today to 30 months in prison by US District Judge John Walter in Los Angeles. In March Weiss agreed to plead guilty to a single count of racketeering, admitting that he engaged in a pattern of racketeering activity covering the period of 1979 to 2005 by paying kickbacks to plaintiffs (earlier). He must report to prison by August 28 (Bloomberg, AP).
Geoffrey Fieger has been acquitted of charges that he violated federal campaign finance laws. mlive.com has Jim Irwin’s AP story here.
More positive news for former Alabama Governor Don Siegelman: Fifty-four former state attorneys general, both Democratic and Republican, have filed a brief with the US Court of Appeals for the Eleventh Circuit asking that Siegelman’s conviction be overturned. Following the primary argument in Siegelman’s appellate brief, the new brief states: “Completely absent from the trial record is any evidence that Governor Siegelman and Mr. Scrushy entered into an explicit agreement whereby Mr. Scrushy’s appointment to the CON board was conditioned upon Mr. Scrushy’s making the political contributions in question” (NYT, AP). Another AP article here has a complete list of the signatories.
Although he is lesser known than the principal defendants in the cases related to convicted former Rep. Duke Cunningham, financier Thomas Kontogiannis received a significant sentence: 97 months in prison for for his involvement in laundering bribe money from hundreds of defense contractors for Cunningham. The sentencing took place on May 16 before US District Judge Larry A. Burns in San Diego. Burns previously sentenced Cunningham to 8 years and 4 months and defense contractor Brent Wilkes to 12 years in prison. Kontogiannis had pleaded guilty in February 2007 to a single count of money laundering in connection with a fraudulent mortgage that allowed Cunningham to buy his mansion in Rancho Santa Fe; at the sentencing hearing, AUSA Jason Forge alleged that Kontogiannis had continued to make fraudulent mortgages after his guilty plea (DOJ, San Diego Union-Tribune).
Joseph Brunson, Timothy McQueen and Tony Pough, the the self-styled “Three Hebrew Boys” of the Capital Consortium Group, were arrested Wednesday in Columbia, South Carolina and charged with conspiracy to commit mail fraud. The charges stem from a scheme in which prosecutors say the three men collected about $80 milliion from about 7,000 investors. They allegedly sold various debt elimination schemes, primarily through military bases and churches, by telling investors that their funds would be invested in the foreign exchange (forex) currency trading market and claiming return yields of between 200% and 500% per night. They allegedly operated a Ponzi scheme, with some early investors being paid off with later investor funds, but prosecutors said that $1 billion is owed (on paper) by the end of this year and that less than $40,000 was actually invested. Investor funds were said to be used to fund lavish purchases, including a $5 million jet and a $1 million motor coach.
The three men are pastors at African-American churches; since pleading not guilty last year to state charges of selling investments without a license, they have denied any wrongdoing and have claimed their financial work is religious and exempt from securities laws. They have been out on bond on the state charges but were jailed after their arraignment Wednesday before US Magistrate Judge Joseph R. McCrorey in Columbia. A detention hearing is scheduled for June 3; the men each face up to 20 years in prison (The State, AP, FBI).
Harry Siskind, the former Mark Nutritionals CEO who pleaded guilty on May 19 to making a false statement to the FTC for lying about the value of his assets (earlier), is in more hot water. He was back in court on Thursday in San Antonio before US District Judge Orlando Garcia, who demanded to know why Siskind got a public defender when he appears to have the means to pay for his own attorney. It turns out that at the time he was pleading indigence, he was traveling around the country playing in high stakes poker tournaments which had $10,000 to $25,000 entry fees. And he owns a house valued at over $500,000 with no mortgage. Judge Garcia has not yet ruled whether Siskind will be required to reimburse taxpayers for the cost of his public defender, but he did tell Siskind that he is to “have nothing to do with poker whatsoever” and that he no longer can travel freely about the country. His sentencing hearing is scheduled for August 28 (Express-News).